By Wang Yang, Research Team on “The Disposal of Non-Performing Assets and the Innovation of Financial Assets Management”, Research Institute of Finance, DRC

Research Report No.59, 2018 (Total 5334) 2018-3-30

Abstract: In recent years, both the amount and rate of non-performing loans of commercial banks in China have increased, in which the manufacturing and wholesale and retail trade take up a high proportion, the non-performing rate of private enterprises and small and medium-sized enterprises is high, and the non-performing loans have popped up not only in the eastern developed areas but also in other regions. The non-performing loans are mainly spawned by the impact of the economic cycle and the negative effects of macroeconomic policies at a certain period. With regard to the meso-economic and micro-economic performance, the causes are due to the homogeneous competition, excessive lending of banks, excessive financing and blind and diversified practice. Generally speaking, non-performing loans are undervalued, and we need to prevent non-performing loans from increasing or leading to a concentrated outbreak. The focus of prevention and control of non-performing risks has shifted from bad accounts to implicit ones, from bad real economy to real estate and financing platform. It is suggested that the system reform of the real estate and local financing platform should be accelerated to resolve the potential risks. Besides, efforts need to be made to improve the incentive compatibility mechanism of the regulatory and financial institutions, flesh out the disposal market of non-performing assets, accelerate the explicitation of implicit non-performing assets, promote the macroeconomic policies and industrial policies, facilitate the transformation of the banking industry, and improve the multi-level financing system and social credit system to prevent the non-performing incremental risks.

Key words: the non-performing loans, implicit non-performing loans, financial risks